How Purchasing conducts its survey

PURCHASING Magazine's 2004 salary survey of purchasing professionals is based on questionnaires completed by 1,368 Purchasing Magazine readers and Website visitors..

The purchasing professionals surveyed represent a wide spectrum of buying responsibilities, industries, and personal backgrounds.

The sample includes a statistical valid number of respondents in our subgroups and categories to allow meaningful comparisons between different segments of the purchasing profession. The overall statistical reliability for a sample of this size is plus or minus approximately 2.8%.

Note should be taken that the reliability of survey findings diminishes with sample size. This is particularly important to keep in mind when examining some of the smaller cells of the tables included in this summary. (Percentages and averages based on a small number of respondents are identified by the symbols * and # when the actual number of respondents is not shown with the percent.)

This year the survey sample was conducted by collecting mail and Internet responses, and there are a surprising number of statistical and demographic differences between those two groups of respondents.

Average salary, age and experience are statistically higher among those who responded by mail or fax than among those who filled out the survey on the Internet ($72,500 vs. $68,100, 47 vs. 44 years of age, 16 vs. 14 years of experience).

The survey was developed by the editors of Purchasing Magazine, but all responses were tabulated by an independent research firm not affiliated with Reed Business Information. Not all the data collected is reported in this article.

Complete results of the 2004 salary survey can be purchased for $500 in U.S. funds. Payment should be made to PURCHASING Magazine, POB 497, New Town Branch, Newton, Mass. 02456. Telephone: (617) 630-3799. Credit card orders are accepted. The report may also be ordered through www.purchasing.com.

Bonuses are bigger and better

More than half (55%) of all survey participants report they receive bonuses as part of their compensation. This is an increase since last year (51%).

For those who received them, the bonus tended to be 10% of base pay, which is consistent with results from last year.

However, the group who received midrange bonuses got slightly bigger bonuses this year. The 6-10% group is smaller, the group that got bonuses in the 11-25% range is bigger; however, this may just be random variation in the sample.

Compensation in the form of bonus payments is more frequently reported by senior purchasing executives than by those with less senior positions (e.g., vice president of purchasing, 91%, vs. buyer, 39%); it is also more prevalent in larger-sized companies, with a breakpoint of companies having sales of more than $50 million. At companies with sales of more than $50 million, 60% or more of the purchasing professionals received bonuses. At smaller companies, less than 50% receive them.

Financial goals and profitability are the leading factors affecting bonuses, as 88% of those who get a bonus cited it as a reason. Nearly a third of those who receive a bonus indicate that cost targets and savings reductions play a role; department cost targets and cost targets for purchased parts were equally important (21%). Nine percent say quality, was a factor: 5%, mentioned cycle time improvements .

Individual goals or projects/personal performance were mentioned by 7% as a basis of their bonus.

Top earners ($100,000+) more frequently cite this than their lower-paid counterparts (11% to 6%). Other factors that impact bonus payments include ontime delivery to customers, inventory reduction and turns, safety, production goals and discretionary bonuses. Lower-paid purchasing staff claim the reason for bonuses is discretionary more often than higher-paid professionals.

More than any other industry, bonuses in the computers and related equipment and communications equipment industries are rewarded for meeting company financial goals (96%). Professionals in the financial and services sector as well as in the primary metals industry are least likely to see a bonus for meeting financial goals; only 76% and 80% do so.

Purchasing professionals in communications equipment and financial and service industries are more likely to be rewarded with bonuses for meeting department cost-targets (38% and 36% respectively). Those in the primary metals and industrial controls/instruments industries are least likely to see such a financial incentive (11%).

Purchasing professionals in the transportation/automotive sector (36%) attribute their bonus to meeting cost targets for purchased parts. Individuals in financial/service areas are least likely to see a bonus for achieving cost targets for purchased parts.

Those in the electronics and transportation/automotive industries (17%) are most likely to mention supplier quality improvements.

With respect to commodity purchasers and their bonuses, machinery (97%) and information technology (96%) buyers cite financial goals more than other commodity buyers.

Information technology, service and MRO buyers (at 15%,13% and 11% respectively) are more likely to mention individual goals/performance than other commodity professionals.

Bonus, by job title

Women's salaries narrow the gap

One-third (453) of the respondents to this year's salary survey are women. This is slightly higher than the proportion of women included in last year's survey. The average annual compensation among female purchasing executives is $57,400. The average salary of women has increased $3,500 (6%) since the last annual survey.

This year's results indicate a $19,600 gap between the average compensation earned by men ($77,000) and women. The survey results show that in percentage terms, women's average compensation very slightly outpaced men's (6% for women versus 5% for me) during the past year.

The highest salary earned by a female respondent to this year's survey is the $230,000 earned by a CP at an industrial controls company. She is one of 27 women who reported annual earnings of $100,000 or more to this year's salary survey. At a base salary of nearly $177,000, she earned 30% of her annual compensation in the form of a bonus. She also has stock options.

Historically, women in the purchasing profession have been younger and less experienced than men.

As in previous years, women respondents tend to have fewer supervisory responsibilities, are in charge of smaller dollar volumes, are less frequently college graduates, and do not hold senior level positions as often as men—all requisites for higher compensation. And, as the survey has found repeatedly over the years, even when these factors are taken into account and men and women with similar experience and responsibilities are compared, the average compensation among women generally appears to be less than the average compensation among men in the purchasing profession.

Salary vs. gender

$100,000 Club

Two-hundred-five purchasing professionals report annual salaries of $100,000 or more in this year's salary survey. This figure represents 15% of all respondents to the survey.

• The average salary of $100,000+ earners is $132,400. The highest salary is $270,000.

• Forty-eight individuals, 3.5% of purchasing professionals, earned $150,000 or more, a 25% increase over last year (2.8%). Again the $200,000 club is almost exclusively male; they all serve as purchasing/materials directors or vice presidents.

• The youngest member of the $100K Club is 30 years old; the oldest is 73.

• The majority of highly-compensated purchasing executives are either a vice president of purchasing (17%) or a purchasing director (43%). Of those earning $150,000 or more, 40% are purchasing VPs and 52% are purchasing directors.

• Nearly one-fourth of this year's top earners hail from the Great Lakes region. The Southeast boasts 19% of the high earners; the mid-Atlantic, 16%; the West, 14%; the Southwest, 10%; the Plains, 8% and New England, 4%.

Sixty-six percent of the $100,000+ earners work at corporate headquarters; 22% work at the division level; 8% are plant employees.

$100,000 clubs varies based on the commodities. Some industry sectors have more high earners than the 15% average: communications (26%), computers and related equipment (24%), process industries (22%), energy/mining/utilities (20%) and financial/services (18%).

The vast majority (93%) of $100,000+ earners have graduated from college. Forty-eight percent hold undergraduate degrees (business, 76%; technical, 11%; liberal arts, 12%; dual undergraduate degrees, 1%) while 44% percent have graduate degrees (MBA, 86%; other graduate degree, 12%; and dual graduate degrees, 2%).

Thirty-nine percent of those earning more than $100,000 have C.P.M. certification, significantly higher than the 24% with certification among those earning less than $100,000. Ten percent of top earners report being certified in production and inventory management (CPIM) by APICS.

Company financial goals are the leading basis for bonus, with 96% of top earners reporting so, followed by department cost targets (28%) and cost targets for purchased parts (27%). Quality improvements and individual performance followed with 13% and 11%, respectively.

Forty-six percent of the $100,000 Club is offered stock options; this compares with 17% of lower-wage earners being given stock options.

Forty percent of the $100,000 Club members received both bonuses and stock options; only five percent were offered neither.

The average value of stock options among top executives stayed close to the level of last year ($75,000 vs. $74,000); the median is $22,500 this year versus $20,000 last year.

But, in an oddity, the average value of stock options is actually slightly lower among $100,000 club members than among those earning lesser compensation ($75,000 vs. $81,000).

One hundred thousand dollars or more

One hundred thousand dollars or more
(Distribution of purchasing professionals earning $100,000 or more according to commodity)